Stock markets claw back early losses triggered by jitters over geopolitical
tensions after Malaysia Airways crash in Ukraine but remain cautious

The FTSE 100 closed slightly higher on Friday after Wall Street bounced, but investor remained wary in the face of tensions over the Malaysian plane crash in Ukraine and Israel's Gaza offensive.

London's benchmark index clawed back early losses to end the day up 11 points - or 0.17pc - at 6,749. France's CAC 40 also rose but Germany's DAX 30 fell 0.45pc. As trading in Europe ended, the Dow Jones Industrial Average and the broad-based S&P 500 had gained 0.6pc.

"Geopolitical risk has come back into focus," said Chris Beauchamp, Market Analyst at IG Index.

The disaster has raised tensions that have already been stoked by broadened US and EU sanctions, another factor weighing on European and Russian stock prices on Thursday and Friday. Israel's launch of ground operations in the Gaza Strip has added to concerns.

As the week ends, sentiment is increasingly wary, despite the CBOE Volatility Index (VIX) - a key measure of market expectations of near-term volatility conveyed by S&P 500 - retreating 14pc after jumping 32pc on Thursday. CNN Money's "fear and greed" index indicates that fear is fast replacing greed as the driving force of the market.

CNN Money's Fear and Greed Index on July 18

CNN Money - trend towards extreme fear

Shares in the US were buoyed by better-than-expected results from Google and IBM overnight which offset worries about geopolitical tensions

"The emphasis is on the positive this morning," said Patrick O'Hare of Briefing.com in the US.

However, he added: "That is of course subject to change as the day progresses since the details surrounding the shooting down of the passenger jet, and Israel's incursion into Gaza, are still being sorted out."

Safe-haven gold, which spiked on Thursday, fell back $12 to $1,306 a ounce as some speculated that the crash could force Russia to resolve the Ukraine crisis.

A flight into US Treasuries looked to have eased with the yield on 10-year bonds rising. However, as the day progressed 10-year yields on UK and German government bonds rose, suggesting some investor were playing it safe.

In Moscow, the rouble-denominated Micex stock index slid 1.3pc, and the dollar-based RTS index dropped 1.75pc. The rouble fell to 35.1 to the dollar and to 47.5 to the euro.

Shares in leading Russian companies dropped, with airline Aeroflot down 5pc after the company restricted some of its flights to Ukraine. Russian oil group Rosneft, one of the main targets of new sanctions against Russia over the crisis in Ukraine, lost a further 0.8pc and Gazprom, which supplies energy to Europe via pipelines going across Ukraine, dropped 0.8pc.

Overnight the crash spooked Asian stock markets, with the Nikkei closing down 1pc. Hirokazu Kabeya, senior strategist at Daiwa Securities, said: "We still don't know details of the incident but (market players) need to shun risks. Tensions had been simmering but they came to the fore again... (Investors) can't be so bold to push ahead with buying at the moment."

MH17 was carrying 298 people from Amsterdam to Kuala Lumpur when it crashed, with US officials saying it was shot down. The plane was lost in eastern Ukraine where government forces are engaged in a fierce battle to quell a rebellion by pro-Russian insurgents.

Shares in Malaysian Airlines, which fell as much as 18pc on the news, closed down 9pc. "Sentiment was already negative, and this just makes it worse," an analyst with AmResearch told Reuters, referring to the mystery of Flight MH370 which went missing in March on a flight from Kuala Lumpur to Beijing with 239 passengers, many of them Chinese, and crew on board.